Cash enters today; the obligation starts today too
Debt may accelerate an investment, strengthen liquidity or avoid a capital increase. However, the cash received is not profit: it is money lent by other players.
Every weekly close matters from the moment of issue. The bond accrues interest, the company needs liquidity to pay it and, as maturity approaches, it must also prepare repayment of principal.
A bond at a glance
The bond card connects debt terms, market price and the issuer's apparent capacity to meet its obligations.
Illustrative figures created to explain the mechanics. They do not belong to an actual issue.
Principal, coupon and maturity
Principal
The main debt that must be repaid. It also determines each holder's proportional share of coupon payments.
Coupon
A financial cost for the company and the income expected by bondholders while the debt remains outstanding.
Maturity
The point when principal and final accrued interest must be resolved.
Accrued interest
Interest accumulated since the latest coupon reset even though the next payment has not yet completed.
What happens at every weekly close
The system calculates accrued interest up to the close.
It checks the issuer's available cash.
If payment is possible, it deducts the coupon and distributes it according to principal held.
If payment is impossible, the coupon becomes pending and the bond moves into default.
Accrual then resets for the following week unless the bond has matured.
Two different paths into default
Default does not only appear on the final date. A company may fail earlier if it cannot cover a weekly coupon.
Enough cash
The coupon is paid, holders receive their share and the bond remains current.
Coupon not covered
The amount becomes pending. The bond defaults even before maturity arrives.
Insufficient principal
Final resolution may include partial payment, pending amounts and a defaulted close if the reserve is insufficient.
Default does not mean the bond disappears
It means an obligation has not been met. Pending amounts remain part of the company's financial situation.
The final week changes cash priority
When maturity falls in the following week, the system prepares a dedicated reserve for principal and the expected final coupon. Incoming cash may be directed towards that obligation first.
The final coupon is calculated using accrued interest up to maturity; the example rounds figures for readability.
Clean price, accrued interest and dirty price
In the secondary market, the quoted bond price may be separated from interest already earned. This distinction prevents buyer and seller from ignoring the time since the latest coupon reset.
The stated coupon is not the same as the actual purchase yield
Return also depends on the price paid, time remaining and whether the issuer completes every payment.
Primary market versus secondary market
Primary market
- the company launches a new issue;
- players finance the issuer directly;
- the target and placement progress can be observed;
- terms originate with the issue.
Secondary market
- existing debt is traded;
- money passes between buyer and seller;
- clean price, accrual and dirty price matter;
- issuer risk may change over time.
How to judge whether the company can pay
A high coupon looks attractive until it is compared with the issuer's actual capacity. Debt should be read as a future obligation, not an isolated figure.
Three ways to reach maturity
Coupons paid and reserve complete
The company arrives with enough cash and settles principal and final interest without strain.
The company depends on final inflows
Any decline in results may leave the maturity reserve incomplete.
Payments exceed liquidity
Coupons or principal remain pending and financial confidence deteriorates.
Common debt mistakes
Looking only at cash received
The initial inflow hides coupons and principal due later.
Assuming a higher coupon means a better bond
Higher return may compensate for higher payment risk.
Waiting until maturity to reserve cash
Other obligations may consume liquidity during the preceding weeks.
Ignoring dirty price
Secondary-market cost includes interest already accrued.
Checklist before issuing or buying
Use
Why is the capital needed and what return can it create?
Coupon
Can it still be paid during a weaker week?
Liquidity
Is there cash for near payments and other obligations?
Maturity
Is there enough time and a plan to gather principal?
Price
Do clean and dirty prices justify expected return?
Risk
What happens if revenue falls or debt rises?
Frequently asked questions
What does a bond represent?
Company debt. The player finances the issuer and expects coupons and repayment of principal.
When are coupons paid?
The weekly close calculates accrued interest and, when cash is sufficient, distributes it according to principal held.
Can default happen before maturity?
Yes. An unpaid weekly coupon may become pending and move the bond into default.
What happens during the final week?
A reserve is prepared for principal and the expected final coupon, prioritising that obligation.
What is the difference between clean and dirty price?
Dirty price adds accumulated accrued interest to clean price.
Does a bond provide board power?
No. The bondholder is a creditor; shareholder power comes from shares.